Fed Loans: Who Didn't Get Them?

The NYT and other papers reporting on the Fed's disclosure of information on the beneficiaries from loans in its special facilities includes the Fed's justification that the loans required collateral and the taxpayers were well protected. It would have been worth including some context here.

At the time the special facilities were at their peak, liquidity carried an enormous premium. The Fed was giving out money to banks, non-financial companies, and foreign central banks at interest rates far lower than those available in the private market at the time. This allowed the recipients to make large profits with this money at the time and in many cases kept the companies in business.

It is not surprising that the vast majority of this money was paid back, since the economy did not collapse. However, this does not mean that the loans did not involve a large public subsidy. It is comparable to giving water to people in the middle of a drought. When it rains again, we can easily get the water back with interest, but that doesn't change the fact that providing water in the drought to the folks like Citigroup and Morgan Stanley who got large amounts of it.